A High Court judge has ruled National Irish Bank (NIB) is entitled to €6.3 million judgment orders against financier Niall McFadden arising from his personal guarantee over a bridging loan to a company to help acquire the Buy & Sell classified ads business.
Mr Justice Frank Clarke found in favour of NIB’s entitlement today but adjourned the making of any orders to Thursday to allow the sides consider his detailed judgment.
The case arose after Mr McFadden, St James Street, London, put together a deal in 2007 to purchase Buy & Sell. Naldin Ltd was incorporated to purchase the business from Associated Newspapers for €21.3 million in a deal funded by NIB. After Mr Naldin was unable to raise equity finance, the business ran into difficulties.
An examinership failed, a receiver was appointed by NIB and the Buy & Sell business was ultimately sold for some €1.9 million.
NIB had advanced more than €18 million to Naldin, secured on charges over the entire assets and undertaking of Naldin, B&S Ltd and Buy & Sell Northern Ireland Ltd.
NIB said, while the assets of the Buy & Sell group would not meet its security for the loans provided, it had taken some comfort from Mr McFadden’s €6.3 million guarantee, especially where he also undertook, as long as he remained under any obligation to NIB, to maintain unencumbered assets of some €20 million.
Mr McFadden had argued the bridging loan facility to which his guarantee related was for a three month period and could only be extended with his written agreement but was in fact extended for some 27 months during which time the economic position of Naldin worsened.
Mr McFadden also claimed NIB’s own actions had made its debt less likely to be recovered. He claimed he had made the best offer to buy the company out of examinership but NIB would not negotiate with him and would now receive just €1.5 million from the receivership.
In his judgment, Mr Justice Clarke noted Mr McFadden was the founder and is currently chairman of the Boundary Capital group of companies. There was little doubt the takeover of Buy & Sell, and Naldin as the vehicle for that takeover, was associated with Boundary and Boundary personnel, he said.
This case concerned only the bridging loan facility granted by NIB to Naldin which was to be a three month facility but actually ran for some 27 months after being extended some five or six times. Mr McFadden had given a personal guarantee over that facility and there was no dispute about the amount owed under that. The issue was whether Mr McFadden remained liable given how the guarantee was extended.
Having analysed the terms of the guarantee, the judge found the various extensions of time of that guarantee were “amendments” to the facility within the terms of clause 3.3 of that facility.
Clause 3.3 required such amendments to be agreed in writing but that did not mean Mr McFadden himself had to agree in writing to such amendments, the judge found. On the facts of the case, all the extensions of time were agreed to in writing and therefore clause 3.3 was complied with.
In those circumstances, clause 3.3 did not overrule another provision of the guarantee (Clause 9.1.2, which allowed the bank some latitude in dealing with a customer without impairing its entitlement to rely on the guarantee), he said. NIB was not debarred from enforcing the guarantee by virtue of giving Naldin more time, he ruled.
Given his findings of the meaning of clause 3.3, the judge found against Mr McFadden and ruled he remains liable under the guarantee.
If he was wrong in his interpretation of clause 3.3 (which would mean that clause was not complied with), then Mr McFadden was entitled to seek to rely on the extension of time as a basis for discharge of his obligations under the guarantee, the judge added.
